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UK brings in tougher tax evasion legislation

April 2015

Companies that aid tax evasion will be penalised under new UK criminal legislation. The offenders will have absolute liability so that the authorities will no longer have to prove “intent to evade tax”.

Strict liability will apply equally to offshore evaders. This means that defendants will be unable to claim they did not know their bank accounts were being managed dishonestly, blaming their accountants for any irregularities.

Danny Alexander, chief secretary to the Treasury, announcing a number of anti-evasion measures, said: “For too long our tax system struggled with the fact that a small minority felt it perfectly OK to indulge in tax avoidance and commit the crime of tax evasion.

“The public will not tolerate being stolen from any more.”

Additionally, the new laws will include an offence of corporate failure to prevent tax evasion and of making evasion possible. Companies allowing employees to help others to evade tax will be treated as accomplices.

Alexander insisted: “No longer should any organisation be able to get away with facilitating or abetting others to evade tax.”

Among the penalties, fines on offshore evaders will be increased and linked to underlying assets. “A billionaire evading £5m ($7.46m, €6.9m) of tax won’t just be liable for that £5m,” said Alexander.

Alongside the new criminal laws there will be a civil offence under which those helping evaders will have to pay amounts matching the amounts being dodged. Alexander said: “If you help someone evade £1m of tax, you risk a penalty of £1m or even more yourself.”

Crawford Spence, professor of accounting at Warwick Business School, commented: “It’s about time that governments started to take tax evasion more seriously. Tax evasion is much more harmful to the economy than welfare fraud, yet the latter is pursued much more vigorously.

“Let’s hope this is more than just posturing by the UK government before an election.”